<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS May 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
During the twelve-month period ended May 31, 1999, the U.S. stock market
reached new heights while experiencing a high degree of volatility. The period
began with the domestic economy growing at a healthy pace with inflation
virtually non-existent. Long-term interest rates stood at 5.81 percent. Asia
was mired in a recession due to the credit crunch that followed the overheating
in the region.
During August and September the stock market lost nearly 20 percent as a result
of the continuing crisis in Asia, the default of the Russian government on its
debt and the near-collapse of a major hedge fund. These events led to
widespread interest rate cuts around the globe in the fourth quarter of 1998,
which provided some stability to the markets and resulted in the reacceleration
of global economic growth in the first quarter of 1999.
PERFORMANCE AND PORTFOLIO STRATEGY
For the twelve-month period ended May 31, 1999, Morgan Stanley Dean Witter
Financial Services Trust's Class B shares produced a total return of 18.69
percent, compared to 0.72 percent for the Lipper Financial Services Fund Index
and 21.03 percent for the broad-based Standard & Poor's 500 Composite Stock
Price Index (S&P 500). During the same period, the Fund's Class A, C and D
shares posted total returns of 19.63 percent, 18.69 percent and 20.12 percent,
respectively. The performance of the Fund's four share classes varies because
of different expenses. The accompanying chart illustrates the growth of a
$10,000 investment in the Fund versus the S&P 500 and Lipper Financial Services
Fund indexes.
The Fund outperformed its peer group during the period due primarily to its
sector rotation strategy. The Fund seeks to capitalize on changes in the market
by overweighting those sectors of the financial services industry that we
believe are best positioned to show above-average earnings growth relative to
the S&P Financial Index.
For most of the fiscal year, over half of the Fund's assets were invested in
wealth management companies including life insurers selling retirement
products, banks focused on processing investment transactions, asset managers
and brokers. These holdings allowed the Fund to benefit from the increased
focus on retirement savings by baby boomers around the
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
world. The Fund also benefited from an overweighting in Internet
financial-services stocks from October through March. We believe that
electronic banking, although still in its infancy, represents a significant
growth opportunity.
More recently, we have cut back the Fund's exposure to both wealth-management
and Internet financial-services companies. The Fund has been repositioned for a
higher-interest-rate environment, focusing on lower-multiple stocks that have
the potential for an earnings turnaround and that are less dependent on the
capital markets. This reallocation included the addition of a 6 percent
exposure to real estate investment trusts (REITs), which may serve as a
potential hedge against inflation, and a 4 percent exposure to mortgage
insurers, which should benefit from fewer prepayments as the increase in
mortgage rates leads to a slowdown in mortgage refinancing. The Fund also added
a 5 percent exposure to the property/casualty insurers sector we had been
avoiding due to a very competitive pricing environment. Many of these companies
now appear to be pricing more rationally. We continue to favor financial
processing companies, which account for 11 percent of the portfolio.
LOOKING AHEAD
We believe that the global economy should rebound to a more normalized growth
rate over the next eighteen months as the emerging markets continue to recover
from their recessions. The slowdown in global growth that occurred in 1998 was
the first one in twenty years that was not precipitated by a recession in the
United States. The economic rebound could cause an uptick in inflation and
interest rates and lead to a return to the mean for stock valuations.
Going forward we will continue to use our sector-rotation approach to
overweight those segments of financial services that we believe to have
above-average earnings growth relative to the peer group and those that are
best positioned to benefit from consolidation, deregulation and technology.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley
Dean Witter Funds. Mr. Merin is the President and Chief Operating Officer of
Asset Management of Morgan Stanley Dean Witter & Co. and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Fund's Investment Manager. He also serves as Chairman, Chief Executive Officer
and Director of the Fund's distributor and transfer agent.
We appreciate your ongoing support of Morgan Stanley Dean Witter Financial
Services Trust and look forward to continuing to serve your investment
objectives.
Very truly yours,
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
2
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FUND PERFORMANCE May 31, 1999
GROWTH OF $10,000 Class B
Date TOTAL S&P 500 LIPPER
February 26, 1997 $10,000 $10,000 $10,000
May 31, 1997 $10,050 $10,602 $10,213
May 31, 1998 $14,597 $13,853 $14,408
May 31, 1999 $17,026(3) $16,767 $14,511
- Fund - S&P 500 - Lipper
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS A,
CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B SHARES
SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES*
- -------------------------------------------------------------
PERIOD ENDED 5/31/99
- ---------------------------
<S> <C> <C>
1 year 18.69%(1) 13.69%(2)
Since Inception (2/26/97) 27.59%(1) 26.60%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES+
- -------------------------------------------------------------
PERIOD ENDED 5/31/99
- ---------------------------
<S> <C> <C>
1 year 19.63%(1) 13.35%(2)
Since Inception (7/28/97) 25.92%(1) 22.28%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++
- -------------------------------------------------------------
PERIOD ENDED 5/31/99
- ---------------------------
<S> <C> <C>
1 year 18.69%(1) 17.69%(2)
Since Inception (7/28/97) 24.96%(1) 24.96%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES+++
- -------------------------------------------------------------
PERIOD ENDED 5/31/99
- ---------------------------
<S> <C>
1 year 20.12%(1)
Since Inception (7/28/97) 25.82%(1)
</TABLE>
---------------
(1)Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2)Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3)Closing value after the deduction of a 3% contingent deferred sales charge
(CDSC), assuming a complete redemption on May 31, 1999.
(4)The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The performance of the Index
does not include any expenses, fees or charges. The Index is unmanaged and
should not be considered an investment.
(5)The Lipper Financial Services Funds Index is an equally-weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Financial Services Funds objective. The Index, which is adjusted for capital
gains distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 10 funds represented in this
Index.
* The maximum CDSC for Class B is 5%. The CDSC declines to 0% after six years.
+ The maximum front-end sales charge for Class A shares is 5.25%.
++ The maximum CDSC for Class C shares is 1% for shares redeemed within one
year of purchase.
+++ Class D shares have no sales charge.
3
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------------
<S> <C> <C>
COMMON STOCKS (91.6%)
Accident & Health Insurance (3.9%)
150,000 AFLAC, Inc. ............................. $ 7,650,000
210,000 Torchmark Corp. ......................... 7,008,750
88,000 UNUM Corp. .............................. 4,735,500
------------
19,394,250
------------
Computer Software (0.4%)
47,500 Great Plains Software, Inc.* ............ 1,787,187
------------
Diversified Commercial Services (5.5%)
240,000 CheckFree Holdings Corp.* ............... 11,280,000
12,500 Fair, Isaac & Co., Inc. ................. 409,375
250,000 Sabre Group Holdings, Inc.* ............. 15,390,625
------------
27,080,000
------------
Diversified Financial Services (9.0%)
77,000 American Express Co. .................... 9,331,437
68,900 Citigroup Inc. .......................... 4,564,625
78,500 Equitable Companies, Inc. ............... 5,509,719
145,000 Fortis (NL) NV (Netherlands) ............ 4,710,067
118,000 General Electric Co. .................... 11,999,125
10,000 Providian Financial Corp. ............... 959,375
179,000 StanCorp Financial Group, Inc.* ......... 4,463,812
35,000 Transamerica Corp. ...................... 2,568,125
------------
44,106,285
------------
E.D.P. Services (7.5%)
180,000 Ceridian Corp.* ......................... 5,940,000
40,000 Computer Sciences Corp.* ................ 2,587,500
100,000 Electronic Data Systems Corp. ........... 5,625,000
415,000 First Data Corp. ........................ 18,649,062
101,200 Sterling Commerce, Inc.* ................ 3,934,150
------------
36,735,712
------------
Finance Companies (1.7%)
59,000 Associates First Capital Corp.
(Class A) ............................... 2,419,000
100,000 MBNA Corp. .............................. 2,762,500
100,000 NextCard, Inc.* ......................... 2,975,000
------------
8,156,500
------------
Financial Publishing/Services (1.6%)
97,500 FactSet Research Systems Inc. ........... 4,168,125
76,000 McGraw-Hill Companies, Inc. ............. 3,942,500
------------
8,110,625
------------
Insurance Brokers/Services (1.7%)
65,000 Marsh & McLennan Companies,
Inc. .................................... 4,728,750
100,000 Mutual Risk Management Ltd.
(Bermuda) ............................... 3,650,000
------------
8,378,750
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------------
<S> <C> <C>
International Banks (0.7%)
164,000 Argentaria Caja Postal y Banco
Hipotecario de Espana, SA
(Spain) ................................. $ 3,675,203
------------
Investment Bankers/Brokers/Services (8.8%)
35,000 Goldman Sachs Group, Inc. ............... 2,377,812
65,000 Hambrecht & Quist Group* ................ 2,335,937
68,000 Legg Mason, Inc. ........................ 2,299,250
50,000 Lehman Brothers Holdings, Inc. .......... 2,731,250
64,000 Merrill Lynch & Co., Inc. ............... 5,376,000
194,700 Paine Webber Group, Inc. ................ 9,150,900
180,000 Schwab (Charles) Corp. .................. 19,046,250
------------
43,317,399
------------
Investment Managers (4.8%)
736,000 Amvescap PLC (United Kingdom)............ 6,717,774
250,000 Federated Investors, Inc. (Class B)...... 4,375,000
134,000 Franklin Resources, Inc. ................ 5,829,000
119,300 Kansas City Southern Industries,
Inc. .................................... 6,710,625
------------
23,632,399
------------
Life Insurance (3.3%)
40,000 American General Corp. .................. 2,890,000
110,000 Lincoln National Corp. .................. 11,192,500
58,000 Protective Life Corp. ................... 2,098,875
------------
16,181,375
------------
Major Banks (13.4%)
123,000 Bank of New York Co., Inc. .............. 4,397,250
200,000 Bank One Corp. .......................... 11,312,500
45,300 Chase Manhattan Corp. ................... 3,284,250
145,000 Huntington Bancshares, Inc. ............. 5,020,625
390,000 Mellon Bank Corp. ....................... 13,918,125
37,500 Morgan (J.P.) & Co., Inc. ............... 5,224,219
84,000 PNC Bank Corp. .......................... 4,809,000
25,000 State Street Corp. ...................... 1,906,250
90,000 Summit Bancorp. ......................... 3,684,375
140,000 U.S. Bancorp ............................ 4,550,000
75,000 UnionBanCal Corp. ....................... 2,770,312
120,000 Wells Fargo & Co. ....................... 4,800,000
------------
65,676,906
------------
Mid-Sized Banks (5.1%)
22,300 AmSouth Bancorporation .................. 632,762
100,000 Compass Bancshares, Inc. ................ 2,956,250
62,500 Fifth Third Bancorp. .................... 4,261,719
65,000 First American Corp. .................... 2,652,813
120,000 First Tennessee National Corp. .......... 4,942,500
75,000 First Virginia Banks, Inc. .............. 3,726,563
105,000 Firstar Corp. ........................... 3,025,312
46,000 Mercantile Bancorporation, Inc. ......... 2,688,125
------------
24,886,044
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ---------------
<S> <C> <C>
Multi-Line Insurance (5.8%)
60,000 American International Group,
Inc. .................................... $ 6,858,750
26,000 AXA (France) ............................ 2,995,964
157,000 Hartford Financial Services
Group, Inc. ............................. 9,930,250
201,500 Nationwide Financial Services,
Inc. (Class A) .......................... 8,702,281
------------
28,487,245
------------
Property -- Casualty Insurers (5.1%)
183,000 Chubb Corp. ............................. 12,821,438
346,500 St. Paul Companies, Inc. ................ 12,322,406
------------
25,143,844
------------
Real Estate Investment Trusts (5.6%)
215,000 Archstone Communities Trust ............. 4,837,500
263,000 Equity Office Properties Trust .......... 7,429,750
105,000 Equity Residential Properties
Trust ................................... 5,033,438
87,000 Public Storage, Inc. .................... 2,539,313
185,000 Spieker Properties, Inc. ................ 7,573,438
------------
27,413,439
------------
Savings & Loan Associations (2.5%)
83,000 Charter One Financial, Inc. ............. 2,349,938
50,000 Golden West Financial Corp. ............. 4,743,750
180,000 TCF Financial Corp. ..................... 4,995,000
------------
12,088,688
------------
Smaller Banks (1.0%)
78,000 Zions Bancorporation .................... 4,962,750
------------
Specialty Insurers (4.2%)
203,000 CMAC Investment Corp. ................... 10,264,188
105,000 MGIC Investment Corp. ................... 5,053,125
90,000 PMI Group, Inc. ......................... 5,265,000
------------
20,582,313
------------
TOTAL COMMON STOCKS
(Identified Cost $437,253,024)........... 449,796,914
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ---------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (9.2%)
U.S. GOVERNMENT AGENCY (a) (7.7%)
$ 38,000 Federal Home Loan Mortgage
Corp. 4.72% due 06/01/99
(Amortized Cost $38,000,000)....... $ 38,000,000
------------
REPURCHASE AGREEMENT (1.5%)
7,411 The Bank of New York 4.50%
due 06/01/99 (dated 05/28/99;
proceeds $7,415,051) (b)
(Identified Cost $7,411,345)........ 7,411,345
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $45,411,345) ...... 45,411,345
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $482,664,369) (c)......... 100.8 % 495,208,259
LIABILITIES IN EXCESS OF OTHER
ASSETS .................................... (0.8) (4,065,363)
-----------
NET ASSETS ................................ 100.0 % $491,142,896
============
</TABLE>
- --------------------------------
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate
shown has been adjusted to reflect a money market equivalent
yield.
(b) Collateralized by $5,612,701 U.S. Treasury Bond 9.25% due
02/15/16 valued at $7,560,313.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$23,968,993 and the aggregate gross unrealized depreciation is
$11,425,103, resulting in net unrealized appreciation of
$12,543,890.
FORWARD FOREIGN CURRENCY CONTRACT OPEN AT MAY 31, 1999:
<TABLE>
<CAPTION>
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE DEPRECIATION
- --------------- -------------- ---------- -------------
<S> <C> <C> <C>
GBP 109,990 $175,589 06/02/99 $ (539)
</TABLE>
Currency Abbreviation:
GBP British Pound.
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $482,664,369)................................... $495,208,259
Receivable for:
Investments sold ............................................... 5,733,907
Shares of beneficial interest sold ............................. 1,971,908
Dividends ...................................................... 285,464
Foreign withholding taxes reclaimed ............................ 51,221
Deferred organizational expenses .................................. 33,501
Prepaid expenses and other assets ................................. 66,807
------------
TOTAL ASSETS ................................................... 503,351,067
------------
LIABILITIES:
Payable for:
Investments purchased .......................................... 11,007,528
Plan of distribution fee ....................................... 421,195
Shares of beneficial interest repurchased ...................... 371,282
Investment management fee ...................................... 321,656
Accrued expenses and other payables ............................... 86,510
------------
TOTAL LIABILITIES .............................................. 12,208,171
------------
NET ASSETS ..................................................... $491,142,896
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................................... $371,987,365
Net unrealized appreciation ....................................... 12,541,580
Accumulated net investment loss ................................... (190)
Accumulated undistributed net realized gain ....................... 106,614,141
------------
NET ASSETS ..................................................... $491,142,896
============
CLASS A SHARES:
Net Assets ........................................................ $ 4,904,946
Shares Outstanding (unlimited authorized, $.01 par value) ......... 315,115
NET ASSET VALUE PER SHARE ...................................... $ 15.57
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) .............. $ 16.43
============
CLASS B SHARES:
Net Assets ........................................................ $474,548,758
Shares Outstanding (unlimited authorized, $.01 par value) ......... 30,882,018
NET ASSET VALUE PER SHARE ...................................... $ 15.37
============
CLASS C SHARES:
Net Assets ........................................................ $ 10,304,559
Shares Outstanding (unlimited authorized, $.01 par value) ......... 670,599
NET ASSET VALUE PER SHARE ...................................... $ 15.37
============
CLASS D SHARES:
Net Assets ........................................................ $ 1,384,633
Shares Outstanding (unlimited authorized, $.01 par value) ......... 89,161
NET ASSET VALUE PER SHARE ...................................... $ 15.53
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended May 31, 1999
<TABLE>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Dividends (net of $71,615 foreign withholding tax).................... $ 3,866,777
Interest ............................................................. 2,785,280
-------------
TOTAL INCOME ...................................................... 6,652,057
-------------
EXPENSES
Plan of distribution fee (Class A shares) ............................ 8,019
Plan of distribution fee (Class B shares) ............................ 4,124,271
Plan of distribution fee (Class C shares) ............................ 73,944
Investment management fee ............................................ 3,181,019
Transfer agent fees and expenses ..................................... 538,813
Registration fees .................................................... 128,691
Professional fees .................................................... 81,933
Shareholder reports and notices ...................................... 79,332
Custodian fees ....................................................... 54,939
Trustees' fees and expenses .......................................... 13,341
Organizational expenses .............................................. 12,213
Other ................................................................ 9,363
-------------
TOTAL EXPENSES .................................................... 8,305,878
-------------
NET INVESTMENT LOSS ............................................... (1,653,821)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ....................................................... 118,351,575
Foreign exchange transactions ..................................... (125)
-------------
NET GAIN .......................................................... 118,351,450
-------------
Net change in unrealized appreciation/depreciation on:
Investments ....................................................... (44,595,986)
Translation of forward foreign currency contracts, other assets and
liabilities denominated in foreign currencies ................... (2,404)
-------------
NET DEPRECIATION .................................................. (44,598,390)
-------------
NET GAIN .......................................................... 73,753,060
-------------
NET INCREASE ......................................................... $ 72,099,239
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1999 MAY 31, 1998*
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss ................................... $ (1,653,821) $ (1,014,831)
Net realized gain ..................................... 118,351,450 36,711,229
Net change in unrealized appreciation ................. (44,598,390) 52,567,299
------------- ------------
NET INCREASE ....................................... 72,099,239 88,263,697
------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares ..................................... -- (3,881)
Class B shares ..................................... -- (455,578)
Class C shares ..................................... -- (2,430)
Class D shares ..................................... -- (1,110)
Net realized gain
Class A shares ..................................... (303,641) (10,962)
Class B shares ..................................... (37,658,512) (3,673,879)
Class C shares ..................................... (730,844) (12,423)
Class D shares ..................................... (152,943) (2,737)
------------- ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS .................. (38,845,940) (4,163,000)
------------- ------------
Net increase from transactions in shares of beneficial
interest ............................................ 80,095,593 117,042,732
------------- ------------
NET INCREASE ....................................... 113,348,892 201,143,429
NET ASSETS:
Beginning of period ................................... 377,794,004 176,650,575
------------- ------------
END OF PERIOD
(Including accumulated net investment losses of $190
and $0, respectively) .............................. $ 491,142,896 $377,794,004
============= ============
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Financial Services Trust (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The Fund's investment
objective is long-term capital appreciation. The Fund seeks to achieve its
objective by investing at least 65% of its total assets in the equity
securities of companies in the financial services and financial services
related industries. The Fund was organized as a Massachusetts business trust on
November 8, 1996 and commenced operations on February 26, 1997. On July 28,
1997, the Fund commenced offering three additional classes of shares, with the
then current shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where securities are traded on more than one exchange, the security
is valued on the exchange designated as the primary market pursuant to
procedures adopted by the Trustees); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at
the latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision of
the Trustees (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); (4) certain portfolio
9
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
securities may be valued by an outside pricing service approved by the
Trustees. The pricing service may utilize a matrix system incorporating
security quality, maturity and coupon as the evaluation model parameters,
and/or research and evaluations by its staff, including review of broker-dealer
market price quotations, if available, in determining what it believes is the
fair valuation of the portfolio securities valued by such pricing service; and
(5) short-term debt securities having a maturity date of more than sixty days
at time of purchase are valued on a mark-to-market basis until sixty days prior
to maturity and thereafter at amortized cost based on their value on the 61st
day. Short-term debt securities having a maturity date of sixty days or less at
the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
except for certain dividends on foreign securities which are recorded as soon
as the Fund is informed after the ex-dividend date. Discounts are accreted over
the life of the respective securities. Interest income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date
such items are recognized. Distribution fees are charged directly to the
respective class.
D. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward foreign
currency contracts are translated at the exchange rates prevailing at the end
of the period; and (2) purchases, sales, income and expenses are translated at
the exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses are included in the Statement of Operations
as realized and unrealized gain/loss on foreign exchange transactions. Pursuant
to U.S. Federal income tax regulations, certain foreign exchange gains/losses
included in realized and unrealized gain/loss are included in or are a
reduction of ordinary income for federal income tax purposes. The Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the changes in the market prices of
the securities.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate exchange
rates. The resultant unrealized exchange gains and losses are included in the
Statement of Operations as unrealized foreign currency gain or loss. The Fund
10
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
records realized gains or losses on delivery of the currency or at the time the
forward contract is extinguished (compensated) by entering into a closing
transaction prior to delivery.
F. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
H. ORGANIZATIONAL EXPENSES -- The Investment Manager incurred the
organizational expenses of the Fund in the amount of approximately $61,100
which have been reimbursed for the full amount thereof. Such expenses have been
deferred and are being amortized on the straight-line method over a period not
to exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.75% to the net assets of the Fund determined at the close of
each business day. Effective May 1, 1999 the Agreement was amended to reduce
the annual rate to 0.725% of the portion of daily net assets in excess of $500
million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
11
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of
the average daily net assets of Class B; and (iii) Class C -- up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts
paid under the Plan are paid to the Distributor for services provided. In the
case of Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for (1) services provided and the expenses borne by it and others
in the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors and others who
engage in or support distribution of the shares or who service shareholder
accounts, including overhead and telephone expenses; (2) printing and
distribution of prospectuses and reports used in connection with the offering
of these shares to other than current shareholders; and (3) preparation,
printing and distribution of sales literature and advertising materials. In
addition, the Distributor may utilize fees paid pursuant to the Plan, in the
case of Class B shares, to compensate Dean Witter Reynolds Inc. ("DWR"), an
affiliate of the Investment Manager and Distributor, and other selected
broker-dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the Distributor
under the Plan and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated,
the Trustees will consider at that time the manner in which to treat such
expenses. The Distributor has advised the Fund that such excess amounts,
including carrying charges, totaled $14,598,285 at May 31, 1999.
12
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended May 31, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.23% and
0.94%, respectively.
The Distributor has informed the Fund that for the year ended May 31, 1999, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $1,231,214 and $15,973,
respectively and received $54,488 in front-end sales charges from sales of the
Fund's Class A shares. The respective shareholders pay such charges which are
not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended May 31, 1999 aggregated
$1,157,833,270 and $1,145,441,061, respectively. Included in the aforementioned
are purchases and sales of U.S. Government securities of $80,332,942 and
$105,600,473, respectively.
For the year ended May 31, 1999, the Fund incurred brokerage commissions of
$98,582 with DWR for portfolio transactions executed on behalf of the Fund. At
May 31, 1999, the Fund's payable for investments purchased included unsettled
trades with DWR of $919,113.
For the year ended May 31, 1999, the Fund incurred brokerage commissions of
$214,696 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At May 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $1,000.
5. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward
contracts") to facilitate settlement of foreign currency denominated portfolio
transactions or to manage foreign currency exposure associated with foreign
currency denominated securities.
13
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk
of an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At May 31, 1999, there was an outstanding forward contract used to facilitate
settlement of a foreign currency denominated portfolio transaction.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1999 MAY 31, 1998*
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................................ 518,207 $ 7,673,522 300,963 $ 4,241,757
Reinvestment of dividends and distributions ......... 23,457 299,079 1,064 13,954
Repurchased ......................................... (382,320) (5,646,484) (146,256) (2,205,269)
-------- -------------- -------- --------------
Net increase -- Class A ............................. 159,344 2,326,117 155,771 2,050,442
-------- -------------- -------- --------------
CLASS B SHARES
Sold ................................................ 12,534,942 184,965,257 19,573,073 253,166,642
Reinvestment of dividends and distributions ......... 2,805,603 35,434,745 293,365 3,846,011
Repurchased ......................................... (10,197,768) (148,220,180) (11,707,449) (147,225,462)
----------- -------------- ----------- --------------
Net increase -- Class B ............................. 5,142,777 72,179,822 8,158,989 109,787,191
----------- -------------- ----------- --------------
CLASS C SHARES
Sold ................................................ 519,816 7,705,724 381,780 5,334,663
Reinvestment of dividends and distributions ......... 56,557 714,314 1,101 14,425
Repurchased ......................................... (273,320) (4,012,407) (15,335) (211,713)
----------- -------------- ----------- --------------
Net increase -- Class C ............................. 303,053 4,407,631 367,546 5,137,375
----------- -------------- ----------- --------------
CLASS D SHARES
Sold ................................................ 435,918 6,435,748 159,352 2,256,843
Reinvestment of dividends and distributions ......... 572 7,257 46 610
Repurchased ......................................... (352,926) (5,260,982) (153,801) (2,189,729)
----------- -------------- ----------- --------------
Net increase -- Class D ............................. 83,564 1,182,023 5,597 67,724
----------- -------------- ----------- --------------
Net increase in Fund ................................ 5,688,738 $ 80,095,593 8,687,903 $ 117,042,732
=========== ============== =========== ==============
</TABLE>
- ---------------
* For Class A, C and D shares, for the period July 28, 1997 (issue date)
through May 31, 1998.
14
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
7. FEDERAL INCOME TAX STATUS
As of May 31, 1999, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to a net operating loss. To reflect
reclassifications arising from the permanent differences, paid-in-capital was
charged $12,213, accumulated undistributed net realized gain was charged
$1,641,418 and accumulated net investment loss was credited $1,653,631.
15
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FEBRUARY 26, 1997*
ENDED ENDED THROUGH
MAY 31, 1999++ MAY 31, 1998**++ MAY 31, 1997
------------------ ------------------ -------------------
<S> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $ 14.38 $ 10.05 $ 10.00
-------- -------- ---------
Income (loss) from investment operations:
Net investment income (loss) ................... (0.06) (0.05) 0.01
Net realized and unrealized gain ............... 2.45 4.58 0.04
-------- -------- ---------
Total income from investment operations ......... 2.39 4.53 0.05
-------- -------- ---------
Less dividends and distributions from:
Net investment income .......................... -- (0.02) --
Net realized gain .............................. (1.40) (0.18) --
-------- -------- ---------
Total dividends and distributions ............... (1.40) (0.20) --
-------- -------- ---------
Net asset value, end of period .................. $ 15.37 $ 14.38 $ 10.05
======== ======== =========
TOTAL RETURN+ ................................... 18.69% 45.25% 0.50%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.97%(3) 1.98% 2.23%(2)
Net investment income (loss) .................... (0.40)%(3) (0.38)% 0.64%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $474,549 $370,181 $176,651
Portfolio turnover rate ......................... 295 % 99 % 17%(1)
</TABLE>
- -------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
MAY 31, 1999 MAY 31, 1998
------------------ ------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $ 14.44 $ 11.51
------- -------
Income from investment operations:
Net investment income .......................... 0.05 0.04
Net realized and unrealized gain ............... 2.48 3.13
------- -------
Total income from investment operations ......... 2.53 3.17
------- -------
Less dividends and distributions from:
Net investment income .......................... -- (0.06)
Net realized gain .............................. (1.40) (0.18)
------- -------
Total dividends and distributions ............... (1.40) (0.24)
------- -------
Net asset value, end of period .................. $15.57 $14.44
======= =======
TOTAL RETURN+ ................................... 19.63% 27.74%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.20%(3) 1.23%(2)
Net investment income ........................... 0.37%(3) 0.34%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $4,905 $2,249
Portfolio turnover rate ......................... 295% 99%
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $ 14.38 $ 11.51
---------- ----------
Income (loss) from investment operations:
Net investment loss ............................ (0.05) (0.05)
Net realized and unrealized gain ............... 2.44 3.13
---------- ----------
Total income from investment operations ......... 2.39 3.08
---------- ----------
Less dividends and distributions from:
Net investment income .......................... -- (0.03)
Net realized gain .............................. (1.40) (0.18)
---------- ----------
Total dividends and distributions ............... (1.40) (0.21)
---------- ----------
Net asset value, end of period .................. $15.37 $14.38
========== ==========
TOTAL RETURN+ ................................... 18.69% 26.95%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.91%(3) 1.96%(2)
Net investment loss ............................. (0.34)%(3) (0.42)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $10,305 $5,284
Portfolio turnover rate ......................... 295% 99%
</TABLE>
- --------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
MAY 31, 1999 MAY 31, 1998
---------------- ---------------
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $14.35 $11.51
-------- --------
Income from investment operations:
Net investment income .......................... 0.04 0.08
Net realized and unrealized gain ............... 2.54 3.01
-------- --------
Total income from investment operations ......... 2.58 3.09
-------- --------
Less dividends and distributions from:
Net investment income .......................... -- (0.07)
Net realized gain .............................. (1.40) (0.18)
-------- --------
Total dividends and distributions ............... (1.40) (0.25)
-------- --------
Net asset value, end of period .................. $15.53 $14.35
======== ========
TOTAL RETURN+ ................................... 20.12% 27.03%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 0.97%(3) 0.94%(2)
Net investment income ........................... 0.60%(3) 0.63%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $1,385 $80
Portfolio turnover rate ......................... 295% 99%
</TABLE>
- --------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter
Financial Services Trust (the "Fund") at May 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
July 6, 1999
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended May 31, 1999, the Fund paid to its shareholders
$0.52 per share from long-term capital gains. For such period, 11.22%
of the income paid qualified for the dividends received deduction
available to corporations.
19
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Michelle Kaufman
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MORGAN STANLEY
DEAN WITTER
FINANCIAL SERVICES
TRUST
(Graphic Omitted)
ANNUAL REPORT
MAY 31, 1999
